Promotional Marketing Issues in Online and Mobile Media

Administrator

Posted on 5.31.2013

:: By David O. Klein ::

The use of promotions and contests in connection with online
and mobile marketing can be a dynamic and cost-effective way to
increase conversions, build a database of engaged consumers and
increase brand awareness. However, businesses must be aware
that government entities, including the Federal Trade Commission
(FTC), Federal Communications Commission (FCC) and various
state attorney generals, are tasked with regulating, investigating
and sanctioning non-compliant marketing practices. So, what legal
issues surrounding the promotion-related online and mobile marketing
space should your enterprise address and be aware of?

Online and Mobile Sweepstakes Marketing

The appeal of promotional contests, games and
sweepstakes is obvious: The opportunity to win
prizes attracts consumers. Despite the allure of the
sweepstakes model, there are specific state and federal
laws that apply to promotional games, as well
as platform rules for marketing on social media
websites, such as Facebook, Instagramand Twitter.
Enterprises not closely following these laws and
platform rules could incur substantial liability.

In assessing your liability risk, the baseline
question to ask is whether the promotion is a game
of chance or skill. Games of chance are considered
illegal lotteries, unless there is a free means of entry,
with no strings attached. Alternatively, games of
skill are an enticing option, but depending on the
structure of the prizes awarded and the degree of
participation of the entity running the promotion,
certain anti-gambling laws may still apply.

When running such contests, it is important
that the associated marketing approaches employed
complies with other applicable laws and
guidelines (e.g. intellectual property laws). This is
especially true when an enterprise offers the opportunity
to win a prize that carries a registered
trademark, such as an iPhone®, or when you are
marketing a contest within a social media environment,
such as Facebook®, and use of the Facebook
® name and/or logo in your marketing
material is required.

Blog and Social Media Website Marketing

Although a slightly different approach to contests
and games, several businesses have recognized the
promotional advantages of incorporating their
branded messages within various blogs and websites.
Some have even begun creating fictitious
blog/social networking pages masquerading as review
sites and posting misleading articles that include
paid testimonials.

While potentially rewarding, this conflation of
marketing with blogs/social networking media carries
significant liability risk. Because of the historical
nature of the Internet as a place for the public
to voice their opinions, there is an expectation that
the blogger/site member in question is not a paid spokesperson. But when a blogger/site member is
engaged in marketing products for a fee, or when
that person is an employee of a company that is
selling products on the blog, there is an inherent
conflict of interest when these relationships are
not properly disclosed. Under those circumstances,
the blog/website can amount to a form of
deceptive marketing.

In fact, the FTC recently updated its “Guides
Concerning the Use of Endorsements and Testimonials
in Advertising” (wsm.co/11SnXbZ) to address
these issues. The essence of the guidelines is
that online marketing material must prominently
display a disclaimer that informs the reader of any
financial interests that the bloggers or writers have
in connection with the products being featured/
discussed. Similarly, the author of a fictitious
article must disclose 1) that the article is not real,
but rather, a marketing device and 2) what the author
stands to gain in connection with writing and
posting it.

The FTC guidelines also strictly prohibit fictitious
testimonials, and when using an authentic
testimonial, the blogger or writer must not alter
it from the original in any material way. Finally,
what the provider of the testimonial stands to
gain by providing the testimonial, must be disclosed
to the reader.

Daily Deal Website Marketing

The “daily deal” business model, which is most
closely associated with industry leaders Groupon
and LivingSocial, offers a unique way for businesses
to promote their brands and attract customers
through “daily deal” coupons, discounts
and other rewards. However, many businesses are
unaware that state and federal laws may apply to
these offers. Problems arise because the discount
offers expire after a certain amount of time. Because
consumers must pay a fee for these “daily
deals,” the offers may be considered gift certificates
and, therefore, fall under the purview of the
Credit Card Accountability, Responsibility and
Disclosure Act (“CARD Act”).

The CARD Act, and its state law counterparts,
requires that all gift certificates have an expiration
date at least five years from the purchase date.
While Groupon, LivingSocial and their competitors
maintain that the discount offers in question
are coupons, and not gift certificates, attorney generals
in multiple states have begun to scrutinize
this business model to determine the nature of the
offers. Additionally, multiple class action lawsuits
have been filed alleging violation of the CARD Act
and corresponding state laws.

Email and Mobile Marketing

Games, contests and other promotional
vehicles, such as those provided
by daily deal vendors, are valuable
marketing opportunities, but email
and mobile marketing should not be
neglected, as they serve as another way
businesses can monetize their client
databases. Many companies do not
take full advantage of these marketing
options, however, because they are unfamiliar
with the federal and state laws
that govern email and mobile marketing
and, thus, do not want to risk the
significant penalties that may be incurred
if they unwillingly violate those laws. If a
company does choose to engage in email and/or
text message marketing, or to use the services of
a third party to manage and market to its databases,
the company should ensure that it and/or
the third-party marketer is complying with all applicable
laws, as well as its own privacy policies.

Be aware that the FTC and FCC require marketers
to obtain prior written consent from consumers
before sending any auto-generated or
pre-recorded text messages to mobile phones. The
consumer’s expressed informed consent to the receipt
of text message marketing and email marketing,
as well as the privacy policy and website
terms and conditions should always be obtained
at the time of sign-up.

Additionally, the federal CAN-SPAM Act of
2003 sets forth specific requirements that must be
followed when marketing to consumers via email.
Under CAN-SPAM, use of false or misleading
header and sender information is prohibited and
the applicable email subject line should accurately
reflect the products/services that are being advertised
in the subject email. CAN-SPAM mandates
that when sending a commercial email message,
businesses must clearly identify the email as an advertisement,
include a valid physical postal address
for the sender and provide consumers with a mechanism
for opting out of future email marketing.

While the use of promotions, gaming, consumer
reviews and blog posts in connection with
online and mobile marketing can garner great
benefits for businesses, it is also necessary to be
cognizant of the associated pitfalls, which may put
your enterprise at legal risk.

About the Author: David O. Klein is the managing partner of Klein
Moynihan Turco LLP in New York, NY, where he
practices Internet Marketing and Promotions Law.